We have received numerous e-mails in our inbox discussing the lack of correlation between the gold price and the performance of gold mining companies.
The message was the same: “Gold is moving up, but miners aren’t, what’s up with that?!”
Unfortunately investors seem to have a really short memory. The gold mines have OUTperformed the gold price in the first two months of the year. That’s clearly visible on the next image:
Also, in an email we sent out earlier today, we also addressed what you can expect from Gold and Gold mining companies in the coming months, but to sum it up, while Gold is up over the past couple weeks, we have met some major resistance. We believe that by mid-Summer or so, this resistance will break and send Spot Gold to over $1300.00/ounce. Once this happens, many of the mining stocks will see a nice run.
READ: The Smart Money Knows It’s Accumulation Time For Small-Cap Gold Stocks – Here’s One You Need To Add To Your Portfolio
From the very first trading day in January to approximately halfway February, the gold miners were effectively outperforming the gold price. Whereas the gold price increased by 6% by February 15, the GDXJ ETF was trading more than 25% higher.
So it’s really normal to see the gold miners taking some time to catch a breath. But even on a YTD overview, the GDXJ continues to outperform the gold price. Gold is up 9%, the GDXJ saw a price increase of 17%.
So whilst there might be a perception of underperforming gold miners, that’s really just what it is.
That’s also confirmed on the next chart, which shows you the betas of the larger gold and silver companies versus the gold price.
As always, some companies outperform and others are underperforming, but there usually is an easy explanation for this.
The gold price is an important, but definitely not the only factor impacting the performance of mining companies. The gold price is an exogenous variable, but the endogenous variables are much more important for a company.
Rule of thumb in this current market environment: Accumulate! >>> READ THIS REPORT <<<
Not all projects are equal, and there are huge differences in the quality of mines and its management.
Of course, you could still just buy the GDX or GDXJ, but these are ETF’s, following a certain benchmark. Which means will also include the bad and overvalued companies, reducing the potential to outperform the gold price.
At Westbrook Radio, we are taking research very seriously. Exactly because we know the mining sector is a minefield. With our decades of experience, and broad network in the mining sector, we have developed a method of cherry picking the BEST PREMIUM QUALITY GOLD & SILVER STOCKS.
Stay calm and accumulate here. With all that’s going on, the landscape is shaping up for a huge Bull run in the Gold sector, and if you want to position yourself properly, it HAS to be in the small-cap sector so you maximize your profit margins. (Read the report above)
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